The Economy Guy

Issue: 9/17/07 Monday

By Global Economy Guru, Tom Harvey…

The US market held its breath today awaiting the Fed’s decision tomorrow, and this week’s upcoming PPI and CPI announcements.
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So, I will be taking this opportunity to talk about other worldly things going on. I want to introduce you to the concept of a “Wild Card”. This is an event that you can’t predict before hand, but MIGHT happen sometime. Generally when they happen, they have a dramatic effect on multiple markets. You see it’s timely to talk about a Wild Card because the shadow of a Wild Card played itself out over the past 2 weeks. And it foreshadows the potential of a BIG Wild Card. Got your interest??

It was just after midnight when the 69th Squadron of Israeli F15Is crossed the Syrian coast-line. On the ground, Syria’s formidable air defenses went dead. An audacious raid on a Syrian target 50 miles from the Iraqi border was under way. At a rendezvous point on the ground, a Shaldag air force commando team was waiting to direct their laser beams at the target for the approaching jets. The team had arrived a day earlier, taking up position near a large underground depot. Soon the bunkers were in flames.

Ten days after the jets reached home, their mission was the focus of intense speculation this weekend amid claims that Israel believed it had destroyed a cache of nuclear materials from North Korea. The Israeli government was not saying. “The security sources and IDF [Israeli Defence Forces] soldiers are demonstrating unusual courage,” said Ehud Olmert, the prime minister. “We naturally cannot always show the public our cards.”

By its actions, Israel showed it is not interested in waiting for diplomacy to work where nuclear weapons are at stake. As a bonus, the Israelis proved they could penetrate the Syrian air defence system, which is stronger than the one protecting Iranian nuclear sites.

This weekend President Mahmoud Ahmadinejad of Iran sent Ali Akbar Mehrabian, his nephew, to Syria to assess the damage. The new “axis of evil” may have lost one of its spokes.

Did you get the picture here??? The Israel’s found out about some nuclear material coming from North Korea being delivered to Syria, and decided it must destroy it. The foreshadowing is of a possible Israeli attack on Iran’s nuclear sites. That would cause a big war in the area. An alternative would be a US attack on those same sites.
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Troubled British bank Northern Rock could be sold off following its emergency bail-out by the Bank of England. Northern Rock shares slumped by almost a third on Friday after the lender was bailed out by an emergency loan from the Bank of England, and slumped again today. In fact, the market for Northern Rock shares was temporarily halted today. (Did you live under the misimpression that you can always sell your stocks?????)

You have got to be vulnerable (to a sale) if your share price has come down.

Worried customers besieged Northern Rock’s 76 branches in Britain on Friday and Saturday to withdraw their savings — despite assurances from politicians, regulators and the bank itself. More of the same occurred today. “Things look really ugly,” the paper quoted a source close to the bank as saying. This was a huge “run on the bank” where customers withdrew $4B of their money. Most Americans don’t think this could happen here, but it happened 3 weeks ago at the Countrywide Banks (just not to the same extent.)
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France faces thinly concealed and growing frustration from Paris‘ European partners, irked at President Nicolas Sarkozy’s strident position towards EU spending limits and attacks on the ECB. Although Sarkozy vowed when he was elected in May to make France a reinvigorated force in Europe, it was left largely isolated at a Friday and Saturday meeting of EU finance ministers and central bankers in Porto, northern Portugal. Eurozone finance ministers criticised France on Friday for not doing enough to rein in its public deficit after Sarkozy invited himself to one of their meetings in July to inform them he might miss a 2010 target to balance the budget.

Sarkozy accused the ECB of helping “speculators” and neglecting “entrepreneurs” by injecting billions of euros of liquidity into the banking system while not lowering interest rates after recent financial market turmoil. The French head of state’s attack against the ECB also added to growing tensions between Paris and Berlin, which considers the central bank’s independence to be sacrosanct.

It looks like not all is love and roses in Europe.
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Here are Today’s closing details:
DJ30 – 13,403 (down 39)

10 year US Treasury Bond – 4.47% (Up .01)

US Dollar - $1.3867/Euro.Gold closed at $724 per ounce. (Up $6)

Oil Closed at $80.57 (Up 1.47) A new high today.

Gasoline is $2.04